Organizational Effectiveness in the IT Industry: The Case of South Korea

Abstract

This paper proposes to increase theoretical and empirical understanding of organizational environments in the rapidly developing country by offering a more rigorous framework of developmental strategy, linking organizational structure to its effectiveness, and presenting an empirical test of the proposed linkages. The present study builds on an organization-contextual perspective in order to focus on how variation in the organizational characteristics of IT industry in Korea produces advantages for its effectiveness. While organizational effectiveness is specified by the financial robustness, a stratified random sample of 120 Korean IT firms is estimated by several regression models. Although the key predictor variables differ depending on the effectiveness outcome measure considered, variables are chosen on the basis of their potential for offering theoretical insights, and each variable represents one of several organizational properties of a firm. The results confirm that the size variable is still in the conventional wisdom but the previous mechanism in Korea such as conglomeration with chaebol groups, export-oriented strategy, and family-controlled factor does not work in IT industry any longer. This change is further suggested by the importance of information network system and IT investment as well as unusual income and firm’s age in affecting organizational effectiveness. The potential implications of these findings and suggestions for future study are discussed.